Regional Report Eastern April 2013

REGIONALREPORT Eastern

Bank gets big by going small

Chip Mahan has made his career targeting niches in the banking industry. Live Oak Banking Co., which he started in 2007, makes most of its profit selling Small Business Administration loans on the secondary market. Since the federal government guarantees 75% of the loan’s value, there’s less risk for the buyer. “What we realized early on with this SBA program was that if we could make really, really good loans to people who paid you back and sell off the government-guaranteed portion of that loan and keep a portion of that loan, we could leverage our balance sheet and make a lot of money.” The good loans come from catering to specific occupations. Live Oak started with veterinarians but has expanded to pharmacists, dentists, funeral-home operators, financial advisers and medical-practice owners.

The bank’s assets have grown 161% since 2009 to $350 million, and it registered a 4% return on assets in 2012. (U.S. banks averaged 1%.) It has one retail location, which doesn’t offer checking but focuses on money-market accounts and certificates of deposit. Paperwork with SBA loans presents a challenge. “Our average loan has 148 documents by the time you get to closing,” Mahan, 61, says. A technology enthusiast, he started the world’s first Internet-only bank, Atlanta-based Security First Network Bank, in 1995 and moved to Wilmington 12 years ago. To reduce paperwork, Live Oak joined with San Francisco-based Salesforce.com Inc. to develop cloud-based software that tracks loans from application until they’re paid off. The technology helped shave closing times 34% and evolved into a separate entity, Wilmington-based nCino LLC, which licenses the software to other banks such as Four Oaks-based Four Oaks Bank & Trust Co.

Briefs

WILMINGTON — Castle Branch will expand its headquarters, investing $10.2 million and adding 420 to its local workforce of 200 within four years. The company, which provides employment services such as background screening, drug testing and employment verification, was founded in 1997.

FAYETTEVILLE — Cape Fear Valley Health System and Winston-Salem-based Novant Health have entered into a purchasing partnership to reduce expenses for equipment and supplies. Financial terms were not disclosed.

MOUNT OLIVE — Southern BancShares will acquire Lucama-based Heritage BancShares for nearly $3.9 million. The combined bank will have $2.3 billion in assets and 77 branches in eastern North Carolina and Virginia. The deal is expected to close during
the second quarter.

RAEFORD — A federal judge sentenced House of Raeford Farms to two years’ probation and ordered it to pay a $150,000 fine for 10 counts of knowingly violating the Clean Water Act. A jury found the Rose Hill-based poultry processor guilty last year of dumping untreated wastewater into the city’s treatment plant.

WILMINGTON —  US Airways will add a second daily flight from Wilmington International Airport to Reagan International Airport in Washington, D.C., starting this month. The Tempe, Ariz.-based carrier started the route earlier this year.

NEW BERN — The air-traffic control tower at Coastal Carolina Regional Airport in New Bern is one of 173 at general-aviation airports across the country expected to close by April 7 because of federal budget cuts known as sequestration. Others in the state set to shutter are in Kinston, Hickory, Winston-Salem and Concord.